A majority of New Zealand grocery suppliers face challenges when dealing with supermarkets and believe they engage in anti-competitive behaviour, new research shows.
Foodstuffs North Island (FSNI), a group which owns retail franchises Four Square, New World and PAK'nSAVE, was met with the highest dissatisfaction from suppliers, with more than 90 percent of those surveyed saying they had "challenges" while dealing with them.
One hundred and fifty-nine members of the New Zealand Food and Grocery Council (NZFGC) took part in the survey. Of those, 64 percent agreed or strongly agreed that "anti-competitive behaviour [from grocery retailers] exists in the New Zealand food and grocery industry".
Ninety-four percent said they had "challenges" in their commercial dealings with FSNI.
New Zealand's food and grocery industry is dominated by FSNI and Foodstuffs South Island (FSSI), which co-operate, and Woolworths New Zealand.
Woolworths owns Countdown and is the franchise owner of Fresh Choice and SuperValue.
Suppliers referenced the power imbalance caused by the duopoly when negotiating with supermarkets.
"There is very limited competition in the New Zealand grocery market," one supplier said. "This is evident by FSNI behaviour in the last two years where they implemented unfair changes and threatened suppliers with delisting or reduction in facings if they don't agree to the new terms or ways of working. In my 17 years in the industry, I have never seen behaviour that bad from one of the chains."
"Foodstuffs North are negotiating with a win or whatever mentality with no regard for partnerships or financial viability of suppliers," said another. "Both Foodstuffs South and Progressive are continuing to act with integrity and a partnership adding value mentality."
Seventy-two percent of surveyed suppliers said they had challenges with FSSI, followed by 69 percent for Countdown, 29 percent for SuperValue & Fresh Choice and 12 percent for the Warehouse.
The power imbalance is evident in the 82 percent of surveyed suppliers who said they had been "threatened with deletion for not agreeing to a customer's [supermarket] terms or margins".
In response to the power imbalance, 93 percent of surveyed suppliers believe a code of conduct is required.
Suppliers were also concerned they weren't able to increase prices thanks to the duopoly, with one-in-three claiming successful implementation of price increases over the past 10 years have only occurred every 2 or more years.
In an earlier submission to the commission, FSNI argued there was not a grocery duopoly in New Zealand. It said changing consumer shopping habits caused by meal kits and online shopping have increased competitive pressure on FSNI.
FSNI also argued it is "constrained to, price competitively at a North Island level and at every local market". It confirmed it "does not consider that there is accommodating behaviour between retailers in the New Zealand grocery sector". They outlined systems in place for suppliers with complaints.
In its submission, Woolworths NZ agreed the grocery sector was "highly dynamic and intensely competitive".
It's expected the Commerce Commission's study will result in a code of conduct for suppliers and supermarkets.